1. Technical Field
The invention relates to the field of information trustworthiness and verification. More particularly, the invention relates to a method and apparatus for certification of facts.
2. Description of Related Technology
Exchange of trustworthy information between two parties is a fundamental element of communication in modern society. The ability to exchange trustworthy information is a necessary condition for all cooperation between pairs of interacting parties across all walks of modern society, including commerce, business, government, law, science, insurance and medicine.
Exchange of numerical, textual and digital information provides a basis for interaction in commerce, business, government, law, science, insurance and medicine. Customarily, such information is exchanged using documents of a standard form made for this purpose. Examples of such documents across various domains includes invoices, payable bills, bank account statements, credit card statements, financial reports, auditing or other accounting reports, appraisal reports, tax return forms, security transaction slips, legal evidence reports, insurance claim forms, scientific experiment reports, clinical study reports, medical files and so on. However, information exchanged during an interaction may take various other forms, such as tables, charts, pictures, audio files, video files and many other forms of digital information.
During the course of an interaction between parties, one party (a fact presenter) may present another party (a fact receiver) with a single or a small number of actionable pieces of information, or facts, which prompt action or cooperation by the receiver. Examples for facts that prompt cooperation are the amount due in a bill, a bank account status, an investment portfolio net worth, corporate annual revenue and total current assets, total taxable income, a photograph submitted as legal evidence, an incident report for an insurance claim, a measurement included in a scientific experiment report, a medical diagnosis, an appraised value of an asset, a result of a clinical study for a new drug, a mortgage monthly payment, a valuation of a company and valuation of a security, and so on. A list of examples of fact-presenter-receiver situations in various domains is presented in Table 1 below:
TABLE 1Fact presenterFact receiverFactBank employeeBankRegistered transactionHospitalMedical insurancediagnosiscompanyHospitalMedical insurancebillcompanyMedical insurancepatientmedical billcompanyUtility companycustomerbillTax auditortax payertax dueTax payergovernmenttax reportCompany financialcompany share-periodical financialofficerholdersreportsMedical doctorpatientdiagnosisLand surveyorslocal authoritiesMap of surveyed areaBankcustomeraccount balanceCredit card companycustomeraccount balance dueInvestment managerinvestorportfolio valueSecuritization trustinvestorsecurity valuationReal estate appraisalowner or buyervalue of propertyprofessionalReal estate appraisalinsurance companyvalue of property to beprofessionalinsuredEye witness to eventcourtphotograph evidneceof eventClinical trialsRegulatory agencyp-value summarizingresponsible medicalcourtstatistical significanceofficerof trial resultPlaintiff in damagesestimate of damagescaseClaimed
Typically, the parties involved in a particular fact exchange may be a fact presenter and one or more fact receivers.
2.1 To illustrate the notion of a fact, consider a simple, concrete example. A utility company issues a monthly bill to a customer based on an amount of units, for example, energy units such as kilowatt/hour, consumed as measured by a consumption gauge, and the unit price set by the company. The billed amount is a fact presented by the utility company (the presenter) to the customer (the receiver). The facts involved are:                Units consumed, as measured by the consumption gauge device;        Unit price, as observed by the utility company's billing office; and        Billed amount, as calculated by the company's billing office by applying a known procedure (multiplication) to “basis facts”: units consumed and unit price.2.3 The Conventional Fact-Exchange Cycle        
The fact-exchange cycle is an entire interaction between fact presenter and receiver regarding a single fact, which includes the fact presentation and subsequent verification or evaluation of trustworthiness. The currently used method to present facts implies that the process of evaluating fact trustworthiness must be ad hoc, inefficient, and costly. As will be seen, a standard way to present trustworthy facts that the receiver may verify or otherwise inspect easily and at will does not currently exist.
Currently, In order to evaluate the trustworthiness of a fact measured or observed by the fact presenter, the fact receiver must:                Request evidence from the fact presenter regarding authenticity of the observation or measurement;        Obtain the evidence from the fact presenter; and        Check that the evidence itself is authentic.Similarly, in order to evaluate the trustworthiness of a fact deduced by the fact presenter from other basis facts, the fact receiver must:        Understand the reasoning procedure applied (for example, figure out which arithmetic calculation was used);        Identify the basis facts, to which this procedure was applied;        Independently verify each basis fact        Check that the deductive reasoning procedure was applied correctly (for example, that the arithmetic calculation is correct).        
For a concrete illustration of the various stages in these exchanges, consider audit accounting offices. A typical auditing task is to verify the facts that constitute the financial reports presented by an individual or an organization. Facts such as total assets or annual revenue are the result of complicated reasoning processes that are applied to an extremely large and complicated factual basis. The fact presenter is the company financial officer. The fact receiver is the audit accountant, a professional fact verifier, on behalf of the company shareholders and government regulators. Audit accountants verify on a test basis some of the observed facts upon which the financial reports are based (ledgers, receipts, etc) and assess their authenticity. They then verify on a test basis that the deductive reasoning processes used to generate the facts in the financial reports were applied correctly.
Following the current verification process can require substantial resources, including many skilled workers and much capital. This can make fact verification practically impossible. Moreover, following the current verification process is sometimes physically impossible, because:                The fact may be based on private information that the presenter cannot disclose to the receiver; or        Given the time that may pass between the moment when the fact was presented to the moment when verification is called for, some observed facts can no longer be conclusively authenticated, or the possibility that they were tampered with post facto cannot be conclusively overruled;        Finally, the current verification procedure requires that the fact presenter cooperate with the verification process. Yet the fact presenting entity, which was inclined to cooperate when the fact was presented, may no longer exist or may not be inclined to cooperate when the time for verification comes.        
To illustrate the complexity of the verification in the conventional fact-exchange cycle, we return to the simple utility bill example.
FIG. 1 depicts the conventional fact-exchange cycle 100 currently used for presentation and verification of the total bill amount fact. In the fact presentation stage 108, the utility bill form 118, sent by mail to the customer 104 by the utility 102, includes all three facts (units consumed 112, unit price 114 and billed amount 116). During the fact verification stage of the cycle 110, in order to perform its own evaluation 106 of the trustworthiness of the billed amount, the customer must follow the following steps:                Recover the reasoning process 120 that was used to generate the billed amount, namely to understand that the billed amount was calculating by multiplying units consumed by unit price;        To evaluate the trustworthiness of the units consumed fact (that may or may not be stated on the bill), the customer 104 must contact the utility company and request evidence 122 that the consumption as reported by the observer (the measurement gauge) was trustworthy, and that the amount of units consumed as appears on file is an accurate copy of that report 124;        To evaluate the trustworthiness of the unit price fact, the customer must contact the utility company and request evidence 126 that the unit price stated on the bill was indeed the correct price as published by the company at the time the bill was generated 128; and        Finally, the customer must verify 130 that the reasoning process that was used to generate the billed amount—a deduced fact—from unit price and units consumed—its basis facts—was executed correctly. This means performing the multiplication and comparing to the billed amount.        In response to customer requests, the utility 102, bears the burden of providing the evidence 132 in response to the customer 104 requests.        
In the business, taxation and the insurance domains, entire industries have been formed to evaluate fact trustworthiness, namely audit accounting to evaluate financial reports, tax agencies to evaluate tax reports, and insurance claims departments to evaluate insurance claims.
3. Examples Illustrating Shortcomings of the Conventional Fact-Exchange Cycle.
As a result of the difficulties inherent to the current verification process, exchange of facts remains plagued with inaccuracy, error and occasional fraud. In finance, famous recent multi-billion-dollar scandals, such as the late-2000s sub-prime financial crisis in the United States, the collapse of Enron Corporation, the Madoff securities fraud and the MF Global Corporation bankruptcy scandal were all direct results of undue trust that fact receivers had placed in facts that they could not conclusively verify. The following is a brief description of two cases that received media attention in the United States a short while before the submission of this application.
3.1 MF Global Corporation
                According to prepared testimony by STANDARD & POORS Ratings Services, Mr. Henri Steenkamp, MF Global CFO, told the agency that he believed the firm's capital and liquidity “had never been stronger” in an October 24 email.        At the MF Global quarterly earnings conference call on Oct. 25, 2011, MF Global CEO Mr. Jon Corzine reported a 191.6 million USD quarterly loss as a result of trading on European government bonds, but said “We've substantially improved our capital and liquidity positions” and expressed confidence in the company's robust financial position. The earnings call transcript is publicly available.        On Sunday, Oct. 30, 2011, a unit of the New York-based brokerage first reported to the Chicago Mercantile Exchange (CME) and the Commodity Futures Trading Commission (CFTC) a “material shortfall” of hundreds of millions of dollars in segregated customer funds.        MF Global filed for bankruptcy on Oct. 31, 2011.        The CME reports that early on Monday, Oct. 31, 2011, officials of MF Global admitted transfer of 700 million USD from customer accounts to the broker-dealer and a loan of 175 USD million in customer funds to MF Global's U.K. subsidiary to cover or mask liquidity shortfalls at the company.        The shortfall in client accounts at MF Global Holdings Ltd was later estimated to be around 1.2 billion USD.These events illustrate two concrete examples of undue trust that fact receivers placed in facts that they could not verify:        1. The shareholders of the publicly-traded MF Global, or the professional investors who represented them, were misinformed regarding the company's liquidity position at the earnings call that took place only six days prior to the company's filing for bankruptcy protection.        2. The MF Global customers trusted reports by the company, according to which the funds in their accounts were handled according to regulations.3.2 The Madoff Securities Fraud        
The Madoff securities fraud, exposed in 2009 was considered one of the largest financial fraud cases in history. According to United States v. Bernard L. Madoff, 09 Cr. 213 (DC), starting in the mid 1990's, the Wall street firm Bernard Madoff Investment Securities, LLC had been sending customers of the investment business fake evidence of trades that had not actually occurred. Based on these fake trade slips, the firm sent customers fake portfolio statements of assets they did not actually own.
The Madoff fraud affair illustrates two concrete examples of undue trust that fact receivers placed in facts that they could not verify:                1. The customers (namely, the investors) could not themselves verify that the trade transactions reported on the evidence presented before them were bone-fide.        2. The customers could not themselves verify that the portfolio statements presented before represented assets they owned in reality.        
This fraud was made possible by the opaque nature of investment management business: the investment manager (the fact presenter in this case) has privacy concerns regarding the exact nature of the firm's trades. The manager is concerned that exposing the entire transaction history of the firm would expose the firm's proprietary investment strategy.
In the Madoff fraud affair, fact receivers (customers) conceded their ability to evaluate the trustworthiness of facts presented to the presenter's concern for privacy.